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ipX: the Second ip revolutionwith Foreword by Yankee Group

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TABLE OF CONTENTS 1 Foreword (by Yankee Group) 3 introduction 3 Legacy telecoms in a changing world 4 the FMC challenge 6 the CapeX convergance conundrum 7 the path to ip and the ip exchange (ipX) 8 the access/applications divide 9 exchange evolution 10 Business model innovation 10 the corporate opportunity 11 Bridging the ip divide12 ipX: today + tomorrow 12 ...the analyst perspective - Yankee Group 14 ...the Vendor perspective - Sybase 365 16 ...the Customer perspective - CSL Limited

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FOREWORD BY YANKEE GROUP

a powerful trio of technology developments in the past decade is triggering a new wave of

global transformation. the internet protocol as a digital communications standard combined

with the increasing demand for broadband capacity and the game-changing economics of

wireless networks are inciting a revolution whose impact will be far greater than the sum of

these parts. Ultimately, it means that all of us will be connected to the things we care about.

Yankee Group has christened this the ’anywhere’ revolution because it is changing the

role of location in everything we do as consumers and enterprises. Some truisms about

anywhere:

• anywhere’s scope will be massive, affecting all corners of the world and taking decades

to fully unfold. Likewise, its impact will be massive, disrupting billion-dollar businesses

and creating a near-trillion-dollar component of the global economy. we believe that

it will dwarf previous technology revolutions. During this period, battles will rage over

the role, architecture, financial support and rights of this anywhere Network™.

• the fundamental change in consumer experience enabled by the anywhere Network is

the radical re-centering of experience around consumer discretion and choice. the past

15 years of technology-enabled consumer empowerment are a mere prologue to this

shift; to date, this empowerment has forced consumers to operate within stovepipes of

information, media and technologies.

• anywhere services must be accessible to the end user without a significant delay no

matter “where” they connect. For some services, such as communications, access must

be instantaneous. For others, like web-based content, access speeds should broadly

match those the customer has come to expect in his or her home environment using

broadband connectivity.

the burden of accomplishing this vision of anywhere is distributed across the services

ecosystem. Service providers cannot achieve it on their own. to deliver an immediate user

experience, improvements will be necessary in devices, user interfaces, modem performance,

content adaptation and network provisioning including peering arrangements.

Mobile service providers who wish to compete successfully in the anywhere world will

need to invest more into their service delivery environments to optimize them for the new

reality of an evolving competitive landscape, fickle end-user demands, and a shift from

communications only to converged communications, internet, media and entertainment

centric service strategies.

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anywhere dictates support for high-quality, secure connectivity for ip-based applications such

as iM, FMC, presence, p2p, video, and web 2.0 mash-up services. ip is both the present and future

architecture for value-added services across the spectrum of fixed and mobile services. a new

peering architecture will soon be required which goes a step beyond the traditional best-effort

internet for service delivery and we view an open and flexible ipX model for service exchange as

part of the critical path to realizing this vision.

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INTRODUCTION

Mobile ip-based services are central to future growth in an increasingly converged fixed/

mobile telecoms industry. Service provider margins are under increasing pressure with the

commoditization of voice and messaging, while a global economic downturn has impacted

both consumer spending and operator investment. end-to-end delivery of innovative

multimedia services however, calls for the inter-working of fixed and mobile networks and

adoption of new business models. ip eXchange (ipX) provides an efficient commercial and

technical solution to interconnection, management and billing of ip traffic—ensuring that

person-to-person voice and messaging services are delivered securely over a private ip

backbone, with guaranteed quality of service (QoS) and equitable distribution of revenues

amongst the value chain.

LEGACY TELECOMS LANDSCAPE IN A CHANGING WORLD

the advent of ip telephony (or ‘Voice-over-ip’) and the internet represents the most

significant industry shift to date and, while the majority of voice traffic is today generated

via legacy circuit-switched networks, ultimately, Voip will become the norm rather than the

exception – shifting tDM traffic to packet-switched networks and opening up opportunities

to extend communities and services seamlessly between the wired and wireless worlds, and

vice versa.

For service providers, the creation of new revenue streams and the ability to differentiate

services has become imFOperative. Mobile service providers have experienced phenomenal

success with text messaging (SMS), but the proliferation of voice and messaging bundles has

resulted in falling arpU (average revenue per user). Meanwhile, fixed-line service providers

have seen margins eroded by a combination of fixed-mobile substitution, intense competition

from dynamic alternative telcos, and iSps offering aggressively priced Voip services.

Consequently, end user behaviour has altered irreversibly. the popularity of new person-

to-person communications mediums such as text and instant messaging, online gaming and

peer-to-peer file sharing has also demonstrated the potential for new ip-based services.

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4

THE FMC CHALLENGE

Seamless and device agnostic end-to-end delivery of such services - the goal of Fixed/Mobile

Convergence (FMC) - presents the biggest challenge, given that the current telecoms landscape

comprises four disparate network access types:

• public circuit-switched telephony networks (pStN)

• public packet-switched telephony networks (xDSL, Fttp, CMtS)

• Cellular networks (GSM, CDMa, UMtS and beyond)

• Fixed wireless networks (wiFi, wiMaX)

each access network is based on a variety of standards, technologies and protocols. public

internet, for example, employs ‘best effort’ technology that is unable to match the quality of

service (QoS) delivered by circuit-switched networks for real-time applications such as voice.

Similarly, ip telephony over the public internet suffers from issues such as latency, jitter and

packet loss.

Fixed-line networks originally built for pOtS (plain Old telephone Service) have evolved into

multi-layered topologies combining both circuit- and packet-switched technologies to meet

demand for higher-speed data services and increased capacity. Such networks have become

increasingly costly to maintain and cannot match the flexibility, efficiency and scalability of

modern packet-switched and next-generation network (NGN) architectures.

Mobile service providers now face a similar scenario, having introduced general packet radio

services (GprS) and third-generation cellular technologies (i.e. w-CDMa, CDMa2000 and beyond)

employing a mix of tDM and ip to support higher-speed data services. a further challenge for

mobile service providers is to replicate the levels of QoS and security inherent within the fixed-

line (i.e. circuit-switched) domain. Other wireless access technologies, such as wiFi and wiMaX,

are limited to providing local-area coverage and require reliable inter-connection with backhaul

networks for transport of ip traffic.

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enabling service interoperability across fixed and wireless networks is arguably the greatest

contributor to the delivery of true Fixed-Mobile Convergence (FMC – see table 1). Consumers

and business users expect the same functionality and availability of an application or

service, regardless of the device and network employed. Meanwhile, network operators and

service providers must find a way to manage their end-to-end delivery on a global scale,

while ensuring, security, QoS and the equitable and sustainable apportionment of revenues

between all members of the value chain.

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• FMC can be used in a number of contexts – from the combination of fixed and mobile technologies within

the customer premises equipment/end-user device (i.e. broadband, cellular, pStN and wiFi), to inter-working

between fixed and mobile/wireless networks.

• FMC’s key value proposition is in extending communities from mobile to fixed, and vice versa, enabling person-

to-person communications via ip-based applications with the same functionality, regardless of the device or

network employed.

• in a true FMC environment, it would be possible to make a video call from a 3G mobile phone to a pC, or access

your online gaming account from your mobile and/or fixed-line phone.

• effectively, FMC delivers all applications, to any location and device, thus increasing service availability to end

users, making businesses more efficient, and providing increased revenues for network operators and service

providers.

Table 1: What is Fixed/Mobile Convergence (FMC)?

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THE CAPEX CONVERGENCE CONUNDRUM

Competitive pressures continue to mount and established service providers risk losing

control of the value chain as web-based players enter the telecoms domain and change the

rules of engagement. Not surprisingly, ip-based modernisation programs are already underway

within fixed incumbents (ptts), local exchange/independent operators (LeCS/iLeCS) and

mobile operators. the key drivers are:

• Cost efficiencies–in both future CapeX and OpeX requirements

• Ongoing standardisation around Sip (Session initiated protocol), ip Multimedia

Subsystem (iMS) and NGN

• the ability to support ip-based multimedia services on top of voice

• Simplified management and delivery of services

• improved time-to-market

each service provider’s circumstances may vary dramatically according to factors such as

legacy infrastructure, replacement cycles and market focus. however, irrespective of the

investment required, the simple fact is that for established players, tDM is getting more

expensive to run than ip. the general consensus is that NGNs will not replace existing

networks. rather, NGN projects will see expansion of transmission speeds and capacities to

augment existing service delivery mechanisms, while growing the installed user base.

according to the itU (international telecommunication Union), NGN migration and

investment strategies typically start with five currently separate networks based on tDM

(pStN, iN, SS7, Mobile, Data atM/ip) and entail:

• Migrating to single ip-based NGN at core segment

• Migrating to ip-based NGN at edge and access segments

• incorporating partial pre-iMS open service architecture

• incorporating full end-to-end ip mode with ipv6

• implementing full iMS functionality

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THE PATH TO IP AND THE IP EXCHANGE (IPX)

Convergence of applications, devices (dual-mode phones) and networks is taking place

globally, albeit at varying levels. Some markets are only just starting to embrace mobile data

services, whereas others are looking to launch into all-ip rollouts that can support:

• SMS & MMS (ip based)

• iM

• push-to-talk over Cellular (poC)

• rich Communications Suite

• Video Sharing

• Video Calling

• presence and Group Management

• Other services based on Sip/iMS

• Voice (packet-based)

the creation of such services is the catalyst for migration and, although there will be much

transference between circuit-switched and ip in the interim, the latter will inevitably become

the dominant form of traffic. Currently, interconnection of ip is optimised for the public

internet, with service providers unable to distinguish between voice and data services or

guarantee quality connectivity.

traditional telecoms interconnects are based on bi-lateral contracts or the purchase of

wholesale capacity, and the sheer volume of agreements, access mediums and applications is

becoming unmanageable. a private network for the transport of ip telephony and other real-

time/conversational person-to-person applications is required because:

• Service providers want to offer managed services they can charge for

• the paying subscriber demands high-quality service

• true ip applications require a managed network with classes of service

“As commoditization continues to impact

ARPUs, there is a definite requirement

for service providers of every tier and type to

control cost.

Moving to an IP technology to peer lowers

cost significantly by removing the need for

multilateral agreements between operators.”

Yankee Group

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THE ACCESS/APPLICATIONS DIVIDE

the ip exchange (ipX – see table 2) bridges the access/applications divide by enabling the

secure transport of any kind of application/rich media, between any type of access network,

with varying levels of QoS:

• ipX provides a gateway to a global managed ip network supporting end-to-end QoS and the principle of

cascading interconnect payments.

• the GSM association (GSMa) completed ipX specifications in 2006 and the first phase of trials of packet voice

services over ipX-enabled networks completed in 2007. Further trials are ongoing.

• the ip interworking alliance has been formed to provide an environment whereby stakeholders from mobile

operators, fixed operators and carriers can agree to technical specifications and commercial templates for the

ipX, which will facilitate the global interworking of ip services.

For service providers, the key benefits of IPX include:

• end-to-end QoS, enabling consistent and predictable service delivery between end users

• prioritisation of time-sensitive applications over less demanding services

• Service Level agreements (SLas) apply from end-to-end across multiple ipX segments

• Full route traceability and connectivity between ‘trusted’ entities

• Fair remuneration to all members of the value chain

• Universal service interoperability (across access networks)

• Single connection and commercial agreement for global reach

The major challenges for IPX are:

• reconciling current mobile and fixed service provider business models (ipX introduces a more transparent pricing

model unfamiliar to fixed service providers)

• Fixed service providers may be tempted to continue using the public internet for its low cost base rather than

embracing ipX for its quality and security

• efforts by mobile service providers to orchestrate FMC delivery via ipX may be in vain if web-based service

providers conquer that market before the mobile service providers are ready

Table 2: What is IP Exchange (IPX)?

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EXCHANGE EVOLUTION

as the name suggests, the GprS roaming eXchange (GrX) was developed to facilitate the

roaming of GprS data. the ’hubbing’ model then evolved to enable mobile service providers to

extend international MMS and SMS to the full GSM community and beyond. Developed by the

GSMa, hubbing delivers major operational and financial efficiencies to mobile service providers

by removing the need to establish bilateral inter-working agreements with each and every

service provider for the exchange of multimedia and text messages. Service providers only have

to connect once to a hub to reach all the other networks connected to that hub and to that

hub’s peers.

Just as these hubbing mechanisms broke significant ground in simplifying a more connected

global mobile environment, so too will the ipX. ipX extends the GrX concept by enabling

connectivity for fixed and other alternative/wireless service providers, allowing these service

providers to interconnect in a much more open and flexible environment – as highlighted in the

table below.

Not only is comprehensive SLa functionality now possible, the open environment also enables

new business model opportunities, based on specific service and destination criteria. Combining

such flexibility - over and above volume-based pricing—with end-to-end QoS for roaming and

interworking (currently not supported by all GrXs), is a significant step forward.

• Mobile operators only

• primarily data roaming

• Simple network Sia

• Fixed and mobile operators, content and application providers. primarily data roaming.

• primarily international person-to-person traffic, e.g. MMS, packet Voice, instant Messaging

• primarily international person-to-person traffic, e.g. MMS, packet Voice, instant Messaging

Table 3: GRX vs. IPX

GrX ipX

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BUSINESS MODEL INNOVATION

the most challenging aspect of Fixed-Mobile service interoperability is in reconciling the

traditional business models of the fixed and mobile domains. Fixed/broadband internet is

largely based on a monthly connection fee and access to ‘free’ (i.e. ad-sponsored) services

and applications. Mobile providers still have a tighter grip on the value chain, and want

to avoid the ‘bit pipe’ scenario, e.g. customers using their Skype service from their iphone;

they need a managed environment in order to meet their subscriber quality service level

obligations. ipX will give fixed and mobile service providers the means to combine quality

services with the flexibility to agree on the right business models for each one.

THE CORPORATE OPPORTUNITY

an increasingly strong market for ipX is the provision of VpN services to multi-national

corporations (MNCs) as a managed service —delivered by service providers.

For example, the ipX would afford those mobile service providers with fixed network

assets (i.e. LLU and DSL) the opportunity to create MpLS ip-VpN services, and offer

connectivity to MNCs as an international, private corporate network proposition.

the important aspect here is that ipX would enable mobile service providers to compete

with established operators in this market, but differentiate their service offerings with a

strong emphasis on mobile connectivity and FMC.

One specific application is the provision of hosted database services. the centralisation

of it and network resources is a key driver of this model. with many organisations now

implementing highly-intelligent CrM and erp systems that require frequent database

queries, reliable and secure connectivity from remote sites will become increasingly

business critical. historically, such connectivity has again been provided via the public

internet, yet ipX will deliver a service that is far superior—providing a managed, trusted

and secure alternative.

the service provider will be ideally positioned to act as the gateway into the ipX,

while the ipX provider could host the centralised database on behalf of the end user.

alternatively, MNCs could continue with their existing corporate VpNs, but use ipX to build

a more secure layer of connectivity above these services, and provide senior management

with hierarchical access to sensitive data.

“Mobile operators get the opportunity to work

with partner networks to offer international

IP-VPN services over the IPX, to business

customers.

It is not likely that such service offerings will

compete with established players in the market for global IP-VPN corporate

networks, but there certainly are specific

opportunities that mobile operators can focus on. For example, post order

tracking systems to enable secure fixed and

mobile remote access to centralised database

applications.”

Paul HodgesExecutive VP

International ServicesCSL Limited

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BRIDGING THE IP DIVIDE

the use of ip in the core network is prevalent amongst mobile service providers

migrating to 3G and beyond, and service providers looking to realise operational

efficiencies, improve time to market, and support new multimedia services. incumbents

have been slower to make the transition, given their substantial legacy investments, but

many have an NGN strategy in place, and rollouts have commenced in markets such as

hong Kong and the UK.

Nevertheless, ipX and the emergence of a two-tiered internet is a self-fulfilling

prophecy. Critics may argue that a private internet will stifle innovation and will only

benefit service providers, but this is simply not the case. the different interconnect

models employed by the public internet and circuit-switched networks will continue to

co-exist in the ipX future, with fixed service providers using the public internet for the

low-cost transit of data services.

in being key to inter-working, the role of ipX in delivering FMC is significant. Quite

simply, any service provider looking to carry ip telephony traffic and other real-time

applications globally, with circuit-switched levels of QoS and reliability, will require ipX.

“The crux of the battle

lies in reconciling the

established (and one-

sided) operator model

with that of the ‘free’

and open (two-sided)

approach of the Internet.

IPX has the potential

to sit in-between these

and ensure revenues

generated by real-time

IP sessions continue to

flow via the networks,

while allowing service

providers to maintain

their position in the

value chain...”

Yankee Group

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IPX: TODAY + TOMORROW

THE ANALYST PERSPECTIVE: YANKEE GROUP

a global ip network will be an important element in realising Yankee Group’s ‘anywhere’

vision – a technology ecosystem for users to interact with and personalise any application

from any location, on any device, at any time. although such a model creates new

revenue opportunities, it also raises two key questions:

• how can service providers maintain sustainable profitability?

• what strategies will help service providers maintain their position in the

value chain?

From a technology perspective, iMS is challenged in delivering on this promise, but the

fact remains that in an all-ip world, network operators will need to differentiate based on

levels of service, and the ability to serve real-time, session-based applications that cannot

be delivered effectively over the unprotected and open internet.

as commoditisation continues to impact arpUs, there is a definite requirement for

operators of every tier and type to control cost. Moving to an ip technology to peer

lowers cost significantly by removing the need for multilateral agreements between

operators. however, there are a number of challenges faced in getting all members of the

value chain onboard:

• the value proposition for service providers will largely be focused around churn

reduction and extending brand acceptance, given that consumers have come to

expect ip services for free

• Fixed-line next-generation rollouts have slowed considerably as a result of cost

cutting, landline loss (to mobile), and lack of business case for replacing legacy

switches

• Business users making ip investments have been reluctant to break away from the

pStN completely, while fixed/mobile convergence (FMC) is not a priority

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it is clear that the mobile community, and specifically the GSM community, will drive

migration to ipX from current GrX networks. Success will ultimately hinge on buy-in from

fixed-line and alternative operators, while a further set of stakeholders to take into account

are OeMs of Cpe–whether of devices or call control servers.

the crux of the battle lies in reconciling the established (and one-sided) operator model

with that of the ‘free’ and open (two-sided) approach of the internet. ipX has the potential

to sit in-between these and ensure revenues generated by real-time ip sessions continue

to flow via the networks, while allowing service providers to maintain their position in

the value chain by understanding the profile, presence and value of the subscriber, and

leveraging these properties in conjunction with brand and quality of user experience.

the main difference however, will be that devices are more open, and the networks more

standardised. Meanwhile, the ipX dynamic for business-class services is that operators can

offer something much more robust, secure and private than the open internet – whether

for FMC, or integration of an ip telephony/Voip platform with other line-of-business

applications.

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THE VENDOR PERSPECTIVE: SYBASE 365

Commentary from: william Dudley, Group Director, product Management

Michel Van Veen, Group Manager, ipX/GrX/MMX product Marketing

ipX migration will gather momentum in 2010, driven primarily by the requirement for the

transit of ip telephony. Operators in europe and, to a lesser extent in North america, will be

the early adopters, using ipX to improve network performance over long-haul connections

(i.e. reduce latency), while negating the need to convert traffic between ip and tDM.

person-to-person (p2p) applications – such as instant messaging (iM) & presence, chat

and video calling – will follow, with mobile operators already implementing the enabling

technologies. although it will take some time before the required handsets achieve

mass market penetration, ipX will be essential in supporting longer-term growth in these

applications.

however, time is not necessarily on the operator’s side. a consortium of companies

including Skype, Microsoft, Google and Yahoo has started to put pressure on the eC

(european Commission) and the FtC (Federal trade Commisssion - US) to force mobile

operators to open up their networks and allow all web applications, like Skype Voip from

the iphone.

Mobile operators have a window of opportunity to define their own services across ipX,

but the development of having to allow access to existing web-based services is clearly a

great threat.

it is likely that the current economic environment will impact adoption of ip services as

operators delay their next-generation network investments, and end users look to get more

mileage out of their current devices. For service providers, ipX will deliver economies of

scale while supporting fixed / mobile convergence. Current voice signalling and messaging

traffic for example, will ultimately be transitioned to ipX to realise cost efficiencies.

in addition, by providing a trusted gateway between service providers, and corporations

and content / application providers, the ipX opens new markets. Operators will be able

to offer enterprise customers a high-performance and secure private ip backbone for

connectivity to centralised databases. Certainly, there is the opportunity for mobile service

providers with a strong presence in the business market to extend their portfolio and grow

revenues using this approach.

“By providing a

trusted gateway

between service

providers, and

corporations and

content/application

providers, the IPX

opens new markets.

Operators will

be able to offer

enterprise customers

a high-performance

and secure private

IP backbone

for connectivity

to centralised

databases.”

Sybase 365

15

Crucially, the ipX-centric ecosystem establishes a second tier of internet over and above the

‘best effort’ employed by the public internet. this ‘internet 2.0’ paradigm enables the concept

of equitable payments between all stakeholders in the value chain, while ensuring the service

quality and guaranteed delivery that are vital to the success of time-sensitive p2p applications.

Diagram 1: IPX is a Flexible Ecosystem

this diagram outlines the view that ipX will likely take. ipX can enable enterprises and hosted

solutions to utilize a high QoS environment and support a variety of services across both fixed

and mobile operators.

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THE OPERATOR PERSPECTIVE: CSL LIMITED

Commentary from: paul hodges, executive Vp international Services

Consensus in the market is that ipX will initially be used for packet Voice interconnectivity

between mobile carriers, replacing tDM technology. although initial trials organized by the

GSMa were primarily run by european operators, it would seem that asia will be the market

where packet Voice will take off first - probably as soon as early 2010. New ip-based services

will start to contribute to ipX volumes once mobile operators have introduced iMS into their

networks and have launched new services. what will be critical is the adoption of the next

generation handsets by the business and consumer market that will enable those services

to users.

FMC’s key value proposition is in extending communities from mobile to fixed, and vice

versa, enabling person-to-person communications via ip-based applications with the same

functionality, regardless of the device or network employed. the demand is definitely there

because it does not make sense at all that common services only operate within their fixed or

mobile island. You cannot explain to the average user that he cannot make a video call from

a webcam pC, to a 3G handset, or that SMS and instant messaging (chat) have nothing to do

with each other. people are right when they say that this should all be possible. all it takes is

an appropriate regulatory framework, technology and standardisation.

Communication has moved from being a luxury to being a necessity of life from both

a social and business perspective. what may possibly be impacted in the current macro

economic environment is the development of new services, where major investment in new

technologies is required. however, the current economic climate also offers an opportunity

for ipX: one of the main drivers for Mobile Operators to migrate voice traffic from tDM to

packet Voice across ipX is cost reduction.

Mobile operators get the opportunity to work with partner networks to offer international

ip-VpN services over the ipX, to business customers. it is not likely that such service offerings

will compete with established players in the market for global ip-VpN corporate networks, but

there certainly are specific opportunities that mobile operators can focus on. For example,

to enable secure fixed and mobile remote access to centralised database applications – post

order tracking systems are an example that spring to mind.

the purpose of ipX is to provide a secure, high quality environment for services that are

chargeable to the parties in the system. things like free movie downloads or simple web

browsing will stay on the public internet. these two worlds can co-exist.

“The purpose of

IPX is to provide a

secure, high quality

environment for

services that are

chargeable to the

parties in the system.

Things like free

movie downloads

or simple web

browsing will stay on

the Public Internet.

These two worlds can

co-exist.”

Paul HodgesExecutive VP International

ServicesCSL Limited

www.sybase.com/365

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ABOUT SYBASE 365

Sybase 365, a subsidiary of Sybase, inc. (NYSe: SY), is the global leader in enabling mobile

information services for mobile operators, financial institutions and enterprises. we provide

our customers with the widest offering in SMS, MMS and GrX interoperability, end-to-end

mobile commerce solutions, innovative text messaging, mobile marketing and content

delivery services. Sybase 365 processes more than one billion messages per day, reaching

800 operators and 3.4 billion subscribers around the world.

For more information visit: www.sybase.com/365 or email: info365@sybase.com.

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